London skyscraper The Gherkin goes into receivership

London skyscraper goes into receivership, with HK$7b landmark set to attract offers from sovereign wealth funds in the Middle East and Asia

PUBLISHED : Friday, 25 April, 2014, 8:57pm
UPDATED : Saturday, 26 April, 2014, 1:50am


The Gherkin, voted London's favourite skyscraper, has been put into receivership 10 years after its completion helped transform the capital's skyline.

The 41-storey City of London landmark is likely to be put up for sale shortly and is expected to attract offers of more than £550 million (HK$7.1 billion) from Middle Eastern and Asian sovereign wealth funds.

Deloitte, appointed to take control of the tower, said the Gherkin's co-owners - a Mayfair-based investment bank and a German property investor, IVG Immobilien - had run into problems related to currency issues, rather than any difficulties with the wider property market.

Changing exchange rates had inflated the size of the original loan and the owners failed to make several debt payments.

Phil Bowers, one of the Deloitte receivers, said: "This is a building in trophy condition whose space is 99 per cent leased.

"The multicurrency deal that financed The Gherkin has been affected by the substantial appreciation of the Swiss franc against the pound." The first 15 floors of the Norman Foster-designed skyscraper are occupied by the insurer Swiss Re, which originally owned the building.

It sold out to IVG and its investment bank partner, Evans Randall, in 2007 for £630 million.

Deloitte said the tenants, who also included Sky News and the highest private club in London, would not be affected by the receivership. The Gherkin, which is also used as a wedding venue, has not yet been put on the market, but a sale process is likely to start in the coming months.

Swiss Re spent £238 million building The Gherkin on the site at St Mary Axe, near the Baltic Exchange shipping market targeted by an IRA bomb in 1992.

James Roberts, head of commercial property research at Knight Frank, said Deloitte would have no problem finding new buyers for The Gherkin. "The commercial property sector follows the general economic cycle and currently, the central London economy is doing well and the City is improving," he said.

It could be sold to a global pension fund, or a US private equity house, but it was more likely that sovereign wealth funds from the Middle East or Asia would swoop, he added.

In December, an investment firm owned by the Singapore government bought a half share of the massive Broadgate development in London for £1.7 billion. Kuwait spent a similar amount buying an office complex next to Tower Bridge.

The Gherkin, which has won multiple awards, has run into trouble at a time when dozens of new skyscrapers are planned.

London Mayor Boris Johnson has been accused of being too eager to allow developers to change the skyline.